New World, Be Brave

There's money to be made in real estate. It was such a simple formula for many years, but when the bottom fell out in 2008, millions of Americans faced brutal financial punishment. Some planners - and even more clients - wrote off the asset class permanently. Yet many investors with the means to buy low have been reaping gains. And there are new opportunities in real estate now for planners and investors with a discriminating eye.

As Financial Planning senior editor Ann Marsh finds in this issue's cover story, "Going Up,", real estate has produced stellar returns lately and many see strong potential for some investment options for the years to come.

And there are many options beyond long-standing domestic and global REITs. Connecticut planner John Bailey is taking clients on trips to Brazil to scout out global real estate markets which, in this case, merge with the concept of socially responsible investing. California planner Eric Bruck has started two real estate investment companies - a nontraded REIT with strong tax-sheltered returns and another focused on the health care sector. He's also placed clients in a private bridge loan mortgage pool.

Marsh told me that, after several weeks of reporting, she found, "One person's disaster is another's opportunity. Yes, real estate was the investment class that nearly took down the global economy via the securitization of ill-considered mortgages, combined with too much leverage. But now many of these low-priced properties present healthy investment opportunities for planners who know where to look for them. Many planners told me that they are excited by this opportunity both in the U.S. and abroad, especially in Europe. ... Overall I sensed a cautious excitement among planners who have found, and are still looking for, strong real estate investments. Yes, the problems with real estate - illiquidity and management issues - aren't going away. But owning real property, whether directly or through partnerships or mortgage pools, can provide a haven from stock market swings."

As Warren Buffett has said, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." As you're diversifying a portfolio, think about that as you consider the Brave New World of real estate.